Asia to stimulate the economy

Featured - July 13th, 2012
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The impacts of the global economic downturn are reaching Asian nations, prompting governments to implement stimulus measures to prevent a downward spiral brought about by weakening consumer and business spending, the Wall Street Journal reports.

South Korea has become the latest country to implement monetary easing. The Bank of Korea cut interest rates by a quarter of a percentage point to 3%, the first time since 2009. However, economists were skeptical that the cutbacks would be able to reverse the slowdown.

Asian economies have also seen a drop in domestic demand as businesses cut back spending and the move could have greater impact than the decline in export demand, according to economists. While most Asian countries depend on exports, investment makes up for most of the countries’ economic activity. Investment accounts for almost half of China’s economy, 35% in India and 30% in South Korea.

The Asian Development Bank trimmed growth forecast for the region while the economic slowdown remains relatively gentle, as employment and domestic spending is holding up, according to the Journal. Central banks in Indonesia and Japan have promised to hold interest rates steady, though both economies have been aggressive in their monetary stimulus policies.